Software giant Microsoft (MSFT) rallied over 6% Wednesday - an impressive move.
Let's check out our favorite charts and indicators.
In this daily bar chart of MSFT, below, we can see that the price of MSFT declined into a low in November. Prices surged upwards from this nadir but notice that trading volume declined.
The daily On-Balance-Volume (OBV) line stayed pretty much flat in October and November. Old-time technical analysts and chart watchers (and tape readers) like to see trading volume increase in the direction of the trend.
The Moving Average Convergence Divergence (MACD) tells a price story only and this is positive - the oscillator made a higher low in November even though prices made a lower low. This is a bullish divergence and by the end of November the indicator turned bullish as it crossed above the zero line.
In this weekly Japanese candlestick chart of MSFT, below, we see a mixed picture. Prices are still in a longer-term downward trend as they trade below the declining 40-week moving average line.
The weekly OBV line is in a downtrend from last November.
The MACD oscillator is only crossing to a cover shorts buy signal. The candles show lower shadows below $225 and that is a positive.
In this daily Point and Figure chart of MSFT, below, we can see an upside price target in the $327 area.
In this weekly Point and Figure chart of MSFT, below, we can see the same upside price target of $327.
Bottom line strategy: MSFT has a 4.86% weighting in the DJIA so we know we should pay attention to its movements but we also know we need to be a critical observer of those jiggles along with shifts in the indicators.
Some traders can be successful looking at just intraday moves but I am not one of them. I am not sure that the past three months of price action in MSFT represents a key bottom. We'll see.
(Microsoft is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells MSFT? Learn more now.)
